Gibraltar Won't Take Legal Action Over Point of Consumption Tax

The UK’s proposed point of consumption tax on non-UK based online gaming companies has gained its fair share of critics since being announced earlier this year.

Among them has been the British Overseas Territory of Gibraltar, which serves as the headquarters for a number of prominent online gaming companies with customers in the UK and the world in general.

The online gaming industry is quite significant to the economy of the 30,000-person territory. Every year, millions of pounds are paid by companies in the form of a levy of one percent of gross profits and one percent tax on turnover from fixed-odds betting.

Those companies would be required to pay much more tax to the UK government should a new proposal be passed in its current form. That could lead to some of the companies withdrawing from the UK completely, which could then lead to less revenue for the Gibraltar government.

Potential negative impacts of the UK point of consumption tax on Gibraltar’s online gaming industry has led to rumours of possible legal action against the UK by Gibraltar’s government. However, those rumours have officially been shot down by Gibraltar’s Chief Minister, Fabian Picardo, who ruled out any legal action against the UK government on the issue.

Despite the news from the Chief Minister, Picardo also reiterated his staunch opposition to the UK’s point of consumption tax and said that it could result in the opposite of its intended effect.

“You actually risk pushing your customers away from well-regulated online gaming services provided from responsible jurisdictions like Gibraltar towards those who are operating in less well regulated jurisdictions,” he said.

Introduced in UK parliament in August, where it passed its first reading, the proposal would include a 15 percent tax on the gross profits of those companies that have UK customers. The tax would come into effect in December next year could generate around £300 million in extra tax revenue for UK government as it continues its economic recovery.

If passed, the tax could set a major precedent over how governments regulate offshore companies who earn revenue from customers based in their countries. It could also lead to a situation where only the major offshore gaming companies have UK-based customers, as smaller companies may view the 15 percent tax rate as much too high.

Many of the companies based in Gibraltar have customers in a large number of other countries, however. That may explain Picardo’s announcement that no legal action will be taken over the UK’s proposed point of consumption tax measures.